By Cas Brentjens, Vice President of Infor Nexus Supply Chain Business Networks, APJ, Infor
As enterprises gear themselves for business recovery this year, many are steeling themselves for impact, especially with the uncertainty surrounding Omicron and other potential Covid-19 variants looming in the shadows. This third year of the global health crisis will have an unparalleled impact on supply chains, with repercussions of from severe supply and demand imbalances reverberating worldwide.
Specifically, the availability and increasing costs of labour, freight capacity, semiconductors, empty chassis, and warehouse storage spaces will continue to be areas of concern in the year ahead. Despite these challenges, I am hopeful that we will see new supply chain patterns emerging from today’s global trade and shipping chaos. To truly ensure and sustain this resilience for the long run, however, organizations will need to leverage technology to strengthen supply chain visibility and operations — this will be key to a brighter supply chain future in 2022 and beyond.
The state of the supply chain snarls
For starters, we must acknowledge and accept that many of today’s supply chain complexities are fragile and closely interlinked; a breakdown or bottleneck at any one part can halt the entire value chain.
Current congestions and delays, for instance, are not merely an issue of shipping or traffic, but of global supply chain networks. 2021 saw a massive shortage of container ships across the globe, which were further exacerbated by historically high e-commerce demand in the pandemic, and thus, increased volumes of inbound shipping out of Asia.
These issues, compounded with a spate of ongoing labour woes, production constraints and delays, and unprecedented disruptions such as the Suez Canal port congestion, snowballed and majorly upended supply lines in the past year. Any progress made was then hindered by further supply chains snarls in the recent year-end shopping season, where the likes of Singles’ Day, Black Friday and Christmas sales threw demand into further disarray.
Container chaos will continue well into 2023
As we enter 2022, companies are now seeking to recover and play catch-up. Yet the scale, severity and persistence of these bottlenecks show no sign of abating — and as a result, we are unlikely to see a return to “business-as-usual” shipping anytime soon. In fact, container chaos is likely to persist well into 2023, with ripple effects on higher ocean and air freight shipping costs will remain, even when current congestion and capacity constraints have settled into a new global equilibrium.
At the same time, we are likely to see traditional ‘peak season’ shipping markets start earlier, and run for longer periods of time, while freight contracts will run for shorter terms. Taking the recent holiday sales as an example — despite businesses’ best efforts to shore up additional resources months ahead of time, demand hit yet another record-breaking high, leaving organizations overwhelmed and dealing with the backlog of delayed orders well into the new year.
A ripple effect of change
These delays and disruptions have also had a consequent impact on the ocean and air freight costs, which have risen rapidly as a result. Many organizations have been cornered into paying inflated shipping fees (some even up to 50 percent more), trickling down to higher costs for end customers — and this pattern is likely to continue, even when current congestion and capacity constraints have settled into a new global equilibrium.
We are also likely to see more shipping companies expand their network of Non-Vessel-Operating Common Carriers (NVOCCs) and third-party logistics providers (3PLs), and improve loading and unloading efficiencies, to drive more reliable freight capacity and service. More shippers will also begin to share their dynamic freight capacity forecast needs with their key network of carriers, to improve overall planning across their freight network.
More importantly, we will see a paradigm shift amongst the C-suites. More executives will be analyzing their global logistics and supply chain strategies, emphasizing greater predictability in tandem with cost management practices, in order to protect their production lines, the end customer experience and total business profitability.
Visibility and resiliency must mission-critical
At the core of all this is a critical need for greater supply chain visibility and resiliency across the supply chain. According to IDC research, increasing supply chain visibility is an immediate priority for 58 percent of APAC organizations in 2022. More than ever, organizations are recognizing that this is crucial to enhancing end-to-end integration and strengthening operational agility and resilience, especially as disruptions show no signs of abating.
Single-minded pursuits of lower costs will have to be replaced with new goals for holistic and multi-dimensional forms of real-time visibility across all supply chain functions. This ranges from considerations like freight capacity to supplier work-in-progress and financial health, modal hand-off points and shipment chain-of-custody progress, and visibility of inventory in transit.
Resilience requires improved exception monitoring, which supports faster reaction times when issues arise within supplier networks or global shipping lanes. Ultimately, success in the final mile delivery of products will become increasingly dependent on investments made in the first mile — and organizations must look to scale their use of Cloud, Artificial Intelligence, Internet of Things, Big Data and predictive analytics to increase agility and control.
The rampant uncertainty around pandemic-influenced supply and demand challenges will persist — but organizations today can no longer afford to be caught off-guard by ‘unprecedented’ delays and disruptions.
2022 will see supply chain agility and predictability reign top-of-mind for business leaders. To achieve this, enterprises will look to invest in broader and more flexible partner connectivity, the addition of external data sources, and intelligent supply networks which connect demand signals and downstream stakeholders with procurement and shipment planning activity upstream. All of this will be crucial to ensuring that organizations can adapt and innovate at speed and scale, pivot nimbly, and position themselves for supply chain success amid a disruptive ‘new normal’.